The World Trade Organization

General Agreement on Tariffs

and Trade

1
 “The WTO, a world economic saviour or, a path to
world domination by multinational companies?”

• A look at the myths and realities:

• How and why were they created?
• What are their principles and key
functions?
• How do they operate?
• What is their future?

2
 A History
• 1930’s - Great Depression, protectionism and
collapse of world trade
• 1940’s - WW2, advance of Communism
• 1944 - Bretton Woods Conference - to
promote trade liberalization and multilateral
economic cooperation
• - to create “three pillars” ITO, IMF, World
Bank

3
 More History
1945 - International Monetary Fund -
- to monitor world currencies,
- maintain orderly system of
international payments,
- lend to countries with balance of
payments problems
- World Bank -
- IBRD, IDA,IFC,MIGA,ICSID
- lends to poor countries for major
infrastructure projects
- investment guarantees and dispute
settlement

4
 And yet more History
1947 - US Congress rejects ITO
- GATT created - weak trade agreement with
small secretariat in Geneva
- major principles:
1/ No trade discrimination
Most Favoured Nation
National Treatment
2/ Trade barriers limited to tariffs
(exception)
3/ Transparency
4/ Regional trade agreements OK
5/ Limited fees on imports e.g.
antidumping , countervail
1947 - 1986 - 7 rounds of negotiations to reduce
tariffs and other trade barriers

5
 Crisis Looms
• 1986 - Uruguay Round - to resolve
growing trade problems - system near
collapse

6
1995 - World Trade Organization
- permanent world trade body, legal status
- establishes common institutional framework
for international trade relations
- 145 + members, 97% of world trade
- NOT a world government, sets rules that
members must implement and obey.
- much stronger than GATT with good dispute
settlement
- all members bound - no selective acceptance
as under GATT
7
 WTO/GATT Basic Principles
1/ No discrimination
“Most Favoured Nation”
“National Treatment”
2/ Trade liberalization
tariff and non-tariff reductions
3/ Predictability
tariff and NTB’s to be “bound”
transparency
4/ More competitive
discourage export subsidies and dumping
5/ More benefits for developing countries
special tariff rates, subsidies, investment
restrictions

8
 WTO Key Functions
1/ administering trade agreements
2/ acting as a forum for trade
negotiations
3/ settling trade disputes
4/ reviewing national trade policies
5/ assisting developing countries in
trade policy
6/ cooperating with other international
trade orgs.
9
 WTO Organization
1/ Ministerial Council
2/ General Council - Trade Policy Review
- Dispute Settlement Body
3/ Councils - Goods
- Services
- Intellectual Property
4/ Committees, Working Parties and Groups

10
 Agreements Administered by
WTO
1/ Goods GATT 1994 -agriculture
-textile/clothing
-subsidies/countervail
-safeguards
-product standards
-anti-dumping
-rules of origin

2/ Services GATS -movement of persons

-air transport
-financial services
-shipping
-telecommunications
3/ Intellectual TRIPS
Property
4/ Investment TRIMS
5/ Disputes Settlement of
Disputes

11
 How does it operate?
• Ministerial Conference - meets every
two years
• General Council - meets regularly
• Secretariat - 550 staff

12
 How are decisions made?
- generally by member consensus - if no
consensus by vote (1 member, 1 vote)
with 2/3 or ¾ required
- amendments to agreements only take
effect if members accept them

13
 How are rules imposed?
- member countries adopt rules in own
domestic legislation
- WTO does not impose rules, decisions
directly, rather gives member right to
impose penalties (trade sanctions)

14
 Dispute Settlement
key to WTO success, covers all WTO agreements
- since 1995, 300 disputes submitted
The Process:
- 1st stage - Consultations - parties have 60 days to try to
negotiate “out of court” settlement
- 2nd stage - if no agreement, dispute settlement panel
established, in consultation with parties
- panel has 6-9 months to examine issues, issue interim report,
get input from parties, and issue final report.
- losing defendant can appeal, appeal report in 3 months
- Dispute Settlement Body accepts report or
rejects (with consensus)
3rd stage - implementation - loser negotiates
reasonable time to implement.
- if doesn’t implement within 30 days, WTO
gives winner OK to retaliate and parties
negotiate mutually acceptable compensation

15
 Current Trends
- increasing freer trade

- increasing fairer trade - Doha Conference

2001
goal to provide developing countries easier
rules on import and investment restrictions,
subsidies, assistance to meet technical,
product standards
- developing countries more power in system
- regional trade agreements (EU) expanding
16
 The Future of WTO?
- will WTO create one global free trade system,
or will global trade be dominated by regional
trade agreements?
- will conflict between developed and
developing countries cause serious
problems?
- will EU agricultural policy or U.S.
noncompliance lead to weakening?
- will dispute settlement be truly effective?

17
 Summary
Many Myths:
- WTO controlled by multinationals
- WTO dictates to countries
- WTO for free trade not fair trade
- WTO against small and poor countries
- WTO anti-environment and labour
WTO Benefits:
- creates orderly world trade and economic system
- handles disputes fairly
- creates integrated world economy which reduces
political conflict
- reduces inequalities between rich and poor, big and small
- freer trade reduces cost of living and creates jobs
worldwide

18